Ghana’s Recurrent IMF Engagements reflect Deep-seated Economic Issues, Energy Economist Warns

Dr. Theophilus Acheampong, an energy economist and political risk analyst, has spotlighted the country’s recurring economic challenges, evidenced by its 17 engagements with the International Monetary Fund (IMF) since independence. This equates to roughly once every 3.5 years, underscoring deep-rooted macroeconomic issues.

In a briefing on Ghana’s National Energy Transition Framework organized by IMANI Africa , Dr. Acheampong pointed out that Ghana’s repeated IMF interventions are driven by four main factors: persistent macroeconomic imbalances, rising public debt, balance of payments difficulties, and inflationary pressures. These issues are mirrored in the IMF program goals of both 2015 and 2023, which focuses on restoring debt sustainability and macroeconomic stability.

Public discontent has grown, with citizens protesting the use of national resources and questioning the efficacy of continuous IMF interventions. An analysis of past IMF programs since 1957, shows consistent patterns in the economic problems prompting Ghana to seek external help.

He stated that, a key element of Ghana’s future economic strategy is transitioning to a sustainable energy framework. The government has introduced comprehensive plans, including the National Energy Transition Framework (2022-2070) and the Ghana Energy Transition and Investment Plan (up to 2060). These plans set ambitious targets for reducing greenhouse gas emissions and promoting renewable energy. However, discrepancies between these documents, particularly in their emphasis on nuclear versus renewable energy, have caused confusion among investors.

According to the presentation, to meet its climate goals, Ghana will need over $500 billion, roughly 7-8% of its Gross Domestic Product (GDP). With limited domestic financial capacity, the majority of this funding must come from external sources. The government has identified various public and private, national and international financing avenues, yet significant challenges remain in attracting these investments.

One major obstacle is the financial instability of key sectors, such as the power sector, which is heavily indebted. The Electricity Company of Ghana (ECG), for example, faces severe financial difficulties, raising concerns among potential investors about the viability of investing in Ghana’s energy transition.

Investors have called for better project packaging and clearer investment opportunities. Creating a centralized database or portal for pre-screened, viable projects could streamline the investment process, providing investors with a clearer understanding of available opportunities and reducing perceived risks.

Despite these challenges, he remains optimistic that with strategic reforms and better investment facilitation, Ghana can attract the necessary funds for its energy transition by engaging more effectively with sovereign wealth funds and other external financiers, and improving public financial management systems.